Rangachary Committee

Prime Minister Manmohan Singh has constituted a committee to review taxation of development centres and the information technology sector in a bid to provide clarity on these issues. It will be headed by former N Rangachary, former chairman, Central Board of Direct Taxes as well as Insurance Development & Regulatory Authority.

The Rangachary panel will finalise the approach to taxation of Development Centres and the IT Sector by August 31, 2012. It will also suggest clarifications and changes that may be needed to remove ambiguity and provide clarity on taxation of the IT Sector.

The committee will engage in consultations with stakeholders and related government departments to finalise the `Safe Harbour provisions’ announced in Budget 2010 sector-by-sector. It will also suggest the approach to taxation of development centres.

The statement said the committee will finalise Safe Harbour Rules individually, sector-by-sector, in a staggered manner and submit draft provisions for three sectors/sub- activities each month starting September 30, 2012. All Safe Harbour provisions expected to be finalised by December 31, 2012. “The overall goal is to have a fair tax system in line with best international practice which will promote India’s software industry and promote India as a destination for investment and for establishment of development centres.

Many multi-national firms carry out activities such as product development, analytical work and software development, through captive entities in India, it said. The reason for this large concentration of development centres in India is the worldwide recognition of India as a place for cost competitive, high quality knowledge related work, the statement said.

“Such development centres provide high quality jobs to our scientists, and indeed make India a global hub for such knowledge centres,”